THE 'INVESTORS CHRONICLE' CONSIDERS THE LABOUR GOVERNMENT from Julien Atkinson
The latest issue of Investors Chronicle naturally enough had quite a lot to say about the repercussions on investors! prospects of the election of the Labour Government. The major article was written by Harold Wincott, the journal's editor-in-chief. It was entitled, significantly enough, "No case for gloom". After referring to previous 'bull' market, Wincott goes on: "Of course, over the coming months the major trend could be reversed. It could happen if Labour went in for a deflationary programme, But this is very unlikely...in the main, I'm sure Labour will rely on our international borrowing powers to raise our reserves, reduce Government expenditure overseas, use physical or fiscal measures to check imports.....(and try to find some internationally acceptable method cf offering export incentives. eee reversal could still come if the new government goes in for a vicious campaign directed against investors. Here, we need to define what we mean by a "vicious campaign."...we can be really sure...that Labour will impose a full-scale capital gains tax.eceoce
"Whether Labour has time to introduce this major reform of a corporation profits tax in its first budget only Mr. Callaghan knows...If it can't be done so soon Labour may use a differential profits tax as a temporary substitute, for such a tax is simple to introduce...Both could be used vindictively, and maybe Labour will feel it is imperative to be beastly to investors in an attempt to buy the trade unions! support for an incomes policy...Apart from this possibility, the new government is bound to attack monopoly and restrictive practices on management's side, and this in the shorter run could make profits more difficult to earn. But what seems to me to be much more important..e.eis the prospect that Labour really might be able to break down the rigidities..which have crippled our econony for years, and which have been responsible for cur relatively slow rate of growth....I don't think investors would worry unduly about the extra taxation measures (providing these are not punitive) a Labour Government will certainly introduce..."
The Stockbrokers Notebook considered the effect on steel shares: “seco investors are right in not underestimating the Labour Government's ability to push a bill through quickly if it is determined to do so. Equaily, however, it may be wrong to to be too pessimistic about possible compensation terms. The Labour Government knows that it cannot he too beastly to investors and that steel nationalisation, especially if it is on penal terms, will shake overseas confidence as well as that of UK investors. en if it decijes to press on, it may therefore decide to sugar the pill by relatively generous terms - as indeed it has promised unofficially from time to time. It looks very much as if netionalisation..will be based on average market prices over a specified period...It is open to the Labour Government of course to choose an exceptionally bad month or months for steel price share prices, but it did not last time snd seems unlikely to do so this timcsece"